Answer
--All working forms part of the answer
A | This year no of units | 19,000 | |
B | Overhead per unit | $6.40 | |
C = A x B | Total Overheads | $121,600 | |
D | Fixed Overheads | $43,700 | |
E = C - D | Variable overheads | $77,900 | |
F = E/A | Variable overhead per unit | $4.10 | |
G | Direct Materials | $8.00 | |
H | Direct Labor | $6.80 | |
I = F+G+H | Total Variable cost per unit | $18.90 | |
J | Next year no of units | 18,000 | |
K = I x J | Total Cost of Producing next year | $383,900 | |
L | Offer Price | $20.56 | |
M = J | Next year no of units | 18,000 | |
N = L x M | Total Purchase cost | $370,080 | |
O | Unavoidable Fixed Cost | $19,228 | |
P = N + O | Total Cost of Purchasing next year | $389,308 | |
Q = P - K | It company MAKES the part, it will save | $5,408 | Answer |
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